10. Information on operating segments

The Group presents segment information for the current and comparative reporting periods in accordance with IFRS 8 Operating Segments.

The Group is organized and managed by segment, taking into account the type of products and services offered. Each segment constitutes a strategic business entity offering different products and operating on different markets

The Group applies the same accounting principles (policy) to all operating segments. The Group accounts for transactions between segments as if they referred to unrelated parties, i.e. using current market prices. Revenue from transactions between segments is eliminated in the consolidation process.

After elimination of costs arising from intercompany transactions, general and administrative expenses of the Parent Company are presented under unallocated expenses. General and administrative expenses of the Parent Company are incurred for the benefit of the entire Group and cannot be directly attributed to the specific operating segment.

Segment assets do not include deferred tax, income tax receivables or financial assets, except for receivables from buyers and other financial receivables, assets relating to gain on measurement of commodity financial derivative instruments as well as cash and cash equivalents, which represent segment assets.

Segment liabilities do not include deferred tax, income tax liability or financial liabilities, except for liabilities to suppliers, capital commitments and payroll liabilities as well as liabilities relating to loss on measurement of commodity derivative instruments, which represent segment liabilities.

The Group’s financing (including financial revenue and costs) and income tax are monitored at the Group level and they are not allocated to segments.

None of the Group’s operating segments has been combined with another segment to create reporting operating segments.

The Management Board separately monitors operating results of the segments in order to take decisions concerning allocation of the resources, to assess the effects of the allocation and to evaluate performance. The evaluation of performance is based on EBITDA and operating profit or loss. The Group defines EBITDA as EBIT increased by depreciation, amortisation and write-offs for non-financial assets. To write-offs for non-financial assets TAURON Group includes write-offs for non-financial assets of entities consolidated with the full method and the share in write-offs for non-financial assets of entities valued using the equity method. EBIT is defined by the Group as the profit/(loss) before tax, finance income and financial costs, i.e. operating profit/(loss) from continued and discontinued operations.

Change in the breakdown of the Group’s reporting into operating segments

The breakdown of the Group’s reporting for the year ended 31 December 2020 is based on the operating segments presented in the table below. As of 1 January 2020, the Group has separated a new operating segment Renewable Energy Sources, assigning to it the data of companies whose activities are related to the generation of electricity from renewable sources, i.e. wind farms and hydroelectric power plants. In addition, in the Renewable Energy Sources segment, the Group presents the activities of TAURON Wytwarzanie S.A. related to the generation of energy from photovoltaic sources. Until 31 December 2019, companies currently assigned to the Renewable Energy Sources segment were assigned to the Generation operating segment. The figures for the comparable period, i.e. for the year ended 31 December 2019 and as at 31 December 2019, were restated accordingly.

The separation of the Renewable Energy Sources operating segment is associated with the update of strategic directions complementary to the TAURON Group Strategy for the years 2016-2025 performed by the Group in 2019. In this update, the TAURON Group highlighted the need to adapt to environmental requirements and focus on the development of low- and zero-emission sources while making the Group’s asset portfolio more flexible. The update of the strategic directions reinforced the significance of clean energy development, which will form the basis for the TAURON Group’s value creation and assumes an increased share of renewable sources in the TAURON Group’s generation assets. As part of the implementation of the aforementioned strategy, the transaction documentation for the acquisition of five wind farms belonging to the in.ventus group by TEC1 Sp. z o.o., TEC2 Sp. z o.o., TEC3 Sp. z o.o. was signed on 3 September 2019. As a result of this transaction, the production capacity related to the Group’s renewable energy sources has significantly increased and therefore the materiality of the financial data related to the production activities in the area of renewable energy sources has increased.

In addition to the key operating segments listed above, the TAURON Group also conducts operations in quarrying stone (including limestone) for the power industry, metallurgy, construction and highway engineering industry as well as in the area of production of sorbents for use in wet desulphurisation installations and fluidised bed boilers (Kopalnia Wapienia Czatkowice Sp. z o.o.). The operations of TAURON Obsługa Klienta Sp. z o.o., Finanse Grupa TAURON Sp. z o.o., Bioeko Grupa TAURON Sp. z o.o., Wsparcie Grupa TAURON Sp. z o.o. and Polska Energia-Pierwsza Kompania Handlowa Sp. z o.o. are also treated as other operations of the Group.

Presentation of a subsidiary as discontinued operations

As at 31 December 2020, the Group presents the subsidiary TAURON Ciepło Sp. z o.o. as a disposal group, as further discussed in notes 19 and 36 to these consolidated financial statements. Accordingly, the operations of the company have been presented under discontinued operations. In the past, it was reported within the Generation segment. Comparable figures have been restated accordingly.